Pizza And Trade Secrets: These Are A Few Of My Favorite Things

​Earlier this year, the U.S. Commerce Department released a report titled "Intellectual Property and the U.S. Economy: Industry in Focus," which made clear the following point:

Innovation has a positive pervasive effect on the entire economy, and its benefits flow both upstream and downstream to every sector of the U.S. economy. Intellectual property is not just the final product of workers and companies—every job in some way, produces, supplies, consumes, or relies on innovation, creativity, and commercial distinctiveness.

In other words, computer hardware and software companies, pharmaceutical companies, and medical equipment manufacturers are not the only companies with intellectual property. “Every” job in some way creates or relies on it. That’s every. As in every.

While intellectual property can include works and inventions protected by copyright, trademark, or patent law, the “innovation” and “commercial distinctiveness” referred to in the report bring to mind another class of intellectual property: trade secrets. Trade secrets are what make companies unique, and every company that believes it has an advantage over its competitors has them.

By law, trade secrets can be any business or technical information, such as, to name a few, customer lists, training methods, sales strategies, market projections, product evaluations, and manufacturing techniques. To be a trade secret, though, the information must first have value that comes from not being generally known through independent development or reverse engineering. Second, companies owning this valuable information must take reasonable steps to protect the secrecy of it.

A recent trade secret case in federal court showed the importance of both elements in, of all things, the context of pizza. Little Caesars Enterprises, Inc. filed suit in federal court in South Dakota alleging that a former franchisee, Sioux Falls Pizza Company, Inc. ("SFPC"), was stealing the company's "Hot-N-Ready" pizza system. SFPC had been a franchisee for twenty years, but when the franchise agreement ended, SFPC established a competing pizza company in the same location where it had operated the Little Caesars franchise. Little Caesars alleged SFPC was using the company's trade secrets, including the "Hot-N-Ready" system and the specifications for how to let the dough rise, how to apply sauce and toppings, and how to cook and store the pizza. Without the information, Little Caesars contended SFPC could not operate profitably. Little Caesars asked the Court to shut SFPC down pending the remainder of the trial.

Before one questions whether the making of a pizza can even constitute a trade secret, keep in mind this observation made by a North Carolina federal court several years ago in a similar case. When confronted with the argument that “pizza is pizza,” the North Carolina court said:

Ever since Neapolitan Gennaro Lombardi opened the first American pizzeria in New York's Little Italy in 1905, this confection of dough, cheese, tomato sauce, spices and assorted toppings has inspired intense local and regional rivalries. Chicagoans vehemently reject any “Second City” designation when it comes to their succulent “deep dish” pizzas; and, as counsel has acknowledged, Giordanno's and Gino's East have their advocates (although the Court prefers Pizzeria Uno and Due). Elsewhere, New Yorkers prefer it thin and by the slice, while San Franciscans dote on their gourmet pizza. Even in the south, barbecue has begun to appear atop pizza. Wherever and whenever pizza is sold, there are few quicker ways to set Americans to bickering then to ask them who makes the best pizza.

The South Dakota federal court refused to find a trade secret in the Little Caesars' case, though. Under the first required element, the Court said "Little Caesars did not make a clear showing of, and the court could not discern, specifically which information within Little Caesars' system is not generally known." References to "preparation, timing, and amounts of food per hour to minimize waste is not specific enough to constitute a trade secret." Little Caesars could not identify any specific software or computer program, nor any complex manufacturing process, nor any secret that was unique to it. Ultimately, "Little Caesars' description of what makes up its system is too generic or general to amount to a trade secret under the evidence presented at this stage of the litigation."

The court also found that Little Caesars did not do enough to protect whatever secrets it might have. Little Caesars did require its franchisees to sign confidentiality agreements protecting proprietary business information, but Little Caesars required nothing from the franchisee's employees. These employees, who made the dough, applied the toppings, cooked the product, and sold it to customers, had "the most detailed knowledge of Little Caesars' system" but "had no duty or promise to keep that information confidential because they were not required to sign confidentiality agreements."

The court's opinion is yet another reminder that all companies, no matter their industry, should undertake extensive reviews of their business practices and sensitive business information. By conducting a "trade secret audit," companies can better define what their unique processes are, which will serve them well if they must file suit against a former employee or competitor. With a solid grasp on what its trade secrets are, a company can do more than allege it owns "processes" and "methods." The company will not risk having a claim dismissed for lack of specificity.

Once it identifies its trade secrets, companies should also ensure they are creating a culture of confidentiality in the workplace. Improving how employees are trained to handle such information, reviewing physical and cyber-security measures that limit access to the trade secrets, and revising contracts will prove to any court that the company has taken reasonable steps to protect its trade secrets.

Without such precautions, a company's trade secrets will be available for anyone to obtain by (pardon the pun) take-out or delivery.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

"My best business intelligence, in one easy email…"

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Privacy Policy (Updated: October 8, 2015):

hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.